AMTY Amerityre Corporation (PK)

PROPOSAL NO. 5

 ADVISORY VOTE ON THE FREQUENCY OF VOTING ON THE

COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

In addition to the Say-on-Pay advisory vote, we are seeking an advisory, non-binding vote regarding the frequency of future advisory Say-on-Pay votes in accordance with the SEC’s proxy rules, known as a “Say-on-Pay Frequency” advisory vote.

Stockholders will be able to vote that we hold this Say-on-Pay advisory vote every year, two years, or three years, or stockholders may abstain from voting on this proposal.

After due consideration, the Board has decided to recommend that this Say-on-Pay advisory vote on executive compensation occur every three years. While there are valid arguments for annual and biennial votes, we believe that a vote once every three years is the best approach for the Company and its stockholders for a number of reasons, including that a triennial vote will allow our stockholders to better evaluate our executive compensation program in relation to our short- and long-term company performance. Additionally, a triennial vote will provide us with time to respond to stockholder concerns and implement appropriate revisions.

The Board’s decision was based further on the premise that this recommendation could be modified in future years if it becomes apparent that a vote once every three years is not meaningful or a more frequent vote is recommended by best corporate governance practices.

Vote Required

The frequency (one year, two years or three years) that receives the highest number of votes cast by the stockholders will be deemed the frequency for the advisory Say-on-Pay vote preferred by the stockholders. Your vote is advisory and the results are not binding upon the Company. Although not binding, the Board values the opinions of our stockholders and will review and consider the outcome of the vote, along with other relevant factors, in evaluating the frequency of future advisory votes on executive compensation. The Board recommends that stockholders vote for the option of “THREE YEARS” as the preference for the frequency of holding future advisory votes on the compensation of our named executive officers.  It is intended that in the absence of contrary specifications, proxies will be voted for the approval of three years for the frequency of advisory votes on the compensation of the Company’s named executive officers.  Broker non-votes and abstentions will not be counted in the advisory vote on the frequency of approval of the compensation of the named executive officers.

See above for Mr. Sullivan’s biography.

Lynda R. Keeton-Cardno was appointed as the Company’s Principal Financial and Accounting Officer, and Secretary/Treasurer on January 21, 2015.  Since, 2004 Ms. Keeton-Cardno has been the CEO/Managing Member of Lynda R. Keeton CPA, LLC, dba Keeton CPA, an accounting firm based in Henderson, Nevada which provides accounting, audit and consulting services to public and private companies.  Between January 1996 and April 2002 Ms. Keeton-Cardno worked for Arthur Andersen, LLP in Phoenix, Arizona and Las Vegas, Nevada in the audit and advisory and technology risk consulting divisions. Ms. Keeton-Cardno is a Nevada licensed certified public accountant and received her accounting degree from Arizona State University’s School of Business and Honor’s College.  In her various roles she has extensive background and experience in managing high performing accounting departments, filings with the SEC and work needed for review by the Public Companies Accounting Oversite Board.

Long Term Equity Incentives 

Long term incentive awards are a key element of the Company’s total compensation package for individuals in significant positions of responsibility, including the members of our Board of Directors who are compensated entirely in Amerityre stock. Such awards may be made under the 2017 Plan to senior management and select employees who are key to the Company’s achievement of its long-term goals. The purpose of the 2017 Plan is to promote the long term growth and profitability of Amerityre by (i) providing certain officers and employees with incentives to maximize stockholder value, and (ii) enabling Amerityre to attract, retain and reward the best available persons for positions of responsibility. The 2017 Plan provides for a variety of long-term awards including incentive or non-qualified stock options, restricted stock, and performance awards.

The Plan is administered by the Board unless and until the Board delegates administration to the Committee as defined by the 2017 Plan. Awards granted under the 2017 Plan may be incentive stock options, or ISOs, as defined in the Internal Revenue Code of 1986, as amended, or the Code, or stock bonus awards which are awarded to our employees, including officers, who, in the opinion of the Board of Directors or the Compensation Committee, have contributed, or are expected to contribute, materially to our success.

All of our employees and officers are eligible to participate under the 2017 Plan.  A maximum of 3,000,000 shares are available for grant under the 2017 Plan. Under the 2017 Plan, the Board and the Compensation Committee have broad authority to award equity-based compensation arrangements to any eligible employees, officers, or directors of Amerityre.

The following Summary Compensation Table sets forth the aggregate compensation paid or accrued by the Company to the named executive officers, as defined in Regulation S-K Item 402(m)(2) (the “Named Executive Officers”) as of June 30, 2019 and 2018.

(1)  Annual gross wages.

(2)  Based on the aggregate grant date fair value computed in accordance with ASC 718.

(3)  Michael F. Sullivan was first appointed Chief Operating Officer December 1, 2014; then appointed Chief Executive Officer April 1, 2015.

(4) See footnote 4 “Stock Transactions” of the Company’s financial statements as filed on Form 10-k on September 13, 2019 for all assumptions made in the valuation of stock awards.

Employment Agreements

On September 26, 2018, Michael F. Sullivan, the Company’s Chief Executive Officer finalized the negotiation of the replacement and extension of his Employment Agreement.

The Employment Agreement replaces the old Employment Agreement and extends his term of employment to December 31, 2019.

Mr. Sullivan’s compensation package and other material terms are a summarized below.  See the full agreement as filed as Exhibit 10.1 for Form 8-K, which was filed on October 2, 2018.

(a)     An annual salary of $150,000 per year

(b)     Stock awards of 1.98 million shares of the Company’s common stock vesting monthly during the calendar year of 2019;

(c)     Bonus compensation of up to twenty (20)% of his annual salary based on the Company meeting financial objectives of (i) net sales revenue exceeding $4 million in 2019 or (ii) net positive income exceeding $100,000 before payment of preferred dividends in 2019; and,

(d)     Health and medical insurance as available for full-time employees, and participation in any retirement, pension, profit-sharing, stock option, or other plan as in effect from time to time on the same basis as other employees.

If the Company terminates Mr. Sullivan’s employment without cause, Mr. Sullivan is entitled to the lesser of either (i) four (4) months of his annual salary, pro rata of earned bonus compensation, and four (4) months of benefits, or (ii) the balance of his annual salary through the end of the Employment Agreement’s term, pro rata earned bonus compensation, and executive benefits through the balance of the term.

Under her Employment Agreement with the Company, as amended, Lynda R. Keeton-Cardno devotes 25% of her time to the Company and receives an annual salary of $36,000, renegotiable yearly.  In January 2019, Ms. Keeton-Cardno’s employment agreement was extended for 1 year. With the January 2019 extension, Ms. Keeton-Cardno received a 60,000 share restricted stock grant, which were valued at $0.02 per share, vesting quarterly January 2019 through December 2019. If Ms. Keeton-Cardno is terminated by the Company without cause, if there is a change in majority ownership of the Company resulting in the Company ceasing to be publicly traded, or if her position or duties are changed without prior written agreement, all stock due to Ms. Keeton-Cardno under her Employment Agreement will be issued and vest immediately upon any such event.

The Compensation Committee, at its discretion, may award bonuses to the executive officers of the organization in addition to the terms of the above employment contract. For the year ended June 30, 2019 the following bonuses were awarded, both payable in cash:

Grants of Plan Based Awards

The Named Executive Officers received grants of restricted stock described below. In this Proxy Statement, we also describe past grants of restricted stock to our independent directors. When we refer to the phrase “vesting ratably” we mean that the grants vest over time subject to the executive or the director continuing to provide services to us as of each applicable vesting date.

On January 21, 2017, the Company’s Chief Financial Officer, Ms. Keeton-Cardno, received 60,000 shares as part of her employment renewal.  The shares were valued at $0.04 as of January 20, 2017 and vested ratably through December 2017.  All of these shares have been issued: 30,000 in fiscal year 2018, 30,000 in fiscal year 2017.

Under a new 2017 Employment Agreement, the Company’s Chief Executive Officer, Mr. Sullivan, received a stock award of 2.4 million shares of the Company’s common stock vesting ratably over 23 months (February 2017 – December 2018).  As of June 30, 2019, all of these shares had vested: 1,356,521 shares issued in fiscal year 2019, and 521,739 shares issued in each fiscal year 2018 and fiscal year 2017.

On January 21, 2018, the Company’s Chief Financial Officer, Ms. Keeton-Cardno, received 60,000 shares as part of her employment renewal. The shares were valued at $0.02, the closing stock price as of January 21, 2018, and vested ratably through December 2018.  In addition to the stock, her base compensation was adjusted to $36,000 per annum. All of these shares have been issued in fiscal year 2019.

On May 24, 2018, the Board of Director’s approved a partial payment of Mr. Sullivan’s 2017 bonus in stock.  This partial payment of $10,000 resulted in the issuance of 500,000 shares of stock.

On July 20, 2018, in association with the Company’s yearend close and results, the Compensation Committee of the Board approved a discretionary bonus to Mr. Sullivan of which half was paid in stock. This resulted in 375,000 share of stock being issued in fiscal year 2019.

On September 26, 2018, the Company replaced and extended Mr. Sullivan’s Employment Agreement.  The Agreement extended his term of employment to December 31, 2019.  Inclusive in this new Agreement is a stock award of 1.98 million shares of the Company’s common stock vesting monthly over 12 months (January 2019 – December 2019), valued at a fixed rate of $0.0163, the closing stock price on September 28, 2018.  As of June 30, 2019, 990,000 of these shares had vested and were issued.

On January 2, 2019, the Company’s Chief Financial Officer, Ms. Keeton-Cardno, received 60,000 restricted shares as part of her employment renewal.  The shares were valued at $0.02, the closing stock price as of January 2, 2019 and vest quarterly through December 2019.  As of June 30, 2019, 30,000 shares of stock vested and issued.

On June 26, 2019, the Compensation Committee, awarded the following bonuses, payable in cash, for the year ended June 30, 2019:

Option Exercises and Stock Vested

Pension Benefits and Nonqualified Deferred Compensation

The Company does not provide pension benefits or provide any other qualified retirement plans or non-nonqualified deferred compensation plans for its employees or directors. 

Grants to Independent Directors

The grants to our independent directors described below were all under our 2017 Plan.

On January 31, 2017, the Company’s Board of Director’s received a total of 225,000 restricted shares as Board compensation for the term ending November 2017.  Each non-executive Board member received 50,000 shares, and the Audit Committee Chair received 75,000 shares.  The shares vested ratably January – December 2017, and were valued at a fixed rate of $0.0155, the closing stock price on January 31, 2017.  All of these shares are fully vested.

On November 30, 2017, the Company’s Board of Directors received a total of 265,000 shares as Board compensation for the term ending November 2018.  Each non-executive Board member received 60,000 shares, and the Audit Committee Chair received 85,000 shares.  The shares vested ratably December 2017 – November 2018, and were valued at a fixed rate of $0.02, the closing stock price on November 30, 2017. As of June 30, 2019, all shares of stock have vested.

As of November 28, 2018, the Company’s Board of Directors received a total of 350,000 shares as Board compensation for the term ending November 2019.  Under the arrangement, each non-executive Board member received 75,000 shares, and the Audit Committee Chair received 125,000 shares.  The shares vest ratably December 2018 – November 2019, and were valued at $0.02 the closing stock price on November 28, 2018.  As of June 30, 2019, 175,000 shares of stock had vested.

In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation or any other change in our corporate structure affecting common stock, or a sale by us of all or a substantial part of its assets, or any distribution to stockholders other than a cash dividend, our Board of Directors will make appropriate adjustment in the number and kind of shares authorized by the 2017 Plan, and any adjustments to outstanding awards as it deems appropriate.  However, no fractional shares of common stock will be issued pursuant to any such adjustment, and the fair market value of any fractional shares resulting from adjustments will be paid in cash to the awardee.

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Common stock

The following table set forth as of September 30, 2019, the name and address and the number of shares of our common stock held of record or beneficially by each person who held of record, or was known by us to own beneficially, more than five percent of our issued and outstanding common stock, and the name and shareholdings of each director and Named Executive Officer as defined by Item 402 of Regulation S-K, and of all officers and directors as a group.  In determining the number of shares beneficially owned by a person, options or warrants to purchase common stock held by that person that are currently exercisable, or become exercisable within 60 days following, are deemed outstanding; however, such shares are not deemed outstanding for purposes of computing the percentage ownership of any other person.  We believe that all of the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and except as indicated in the other footnotes to this table.

(1) All shares owned directly are owned beneficially and of record and such stockholder has sole voting, investment, and dispositive power, unless otherwise noted. Also includes director shares earned but not issued as of this filing. This table does not include any unvested stock options except for those vesting within 60 days. All addresses are c/o Amerityre Corporation, 1501 Industrial Road, Boulder City, Nevada 89005.

(2) Applicable percentages are based on 48,555,867 shares of common stock outstanding as of the Record Date. Includes shares of common stock and options underlying common stock as of the Record Date.

(3) Mr. Sullivan’s beneficial ownership consists of 5,937,581 shares of common stock and 1,920,000 common stock options. Does not include 165,000 unvested shares. Mr. Sullivan is a director, Named Executive Officer, and beneficial owner of more than five percent of the Company’s securities, but is listed only once in the above table in accordance with SEC Rules and guidance.

(4) Mr. Gilland’s beneficial ownership consists of 285,000 shares of common stock and 150,000 common stock options. All shares and options for Mr. Gilland are vested.

(5) Mr. Stoddard’s beneficial ownership consists of 185,000 shares of common stock and 100,000 common stock options. All shares and options for Mr. Stoddard are vested.

(6) Mr. Clark’s beneficial ownership consists of shares 185,000 of common stock and 100,000 common stock options. All shares and options for Mr. Clark are vested.

(7) Mr. Hollister’s beneficial ownership consists of 185,000 shares of common stock 100,000 common stock options. All shares and options for Mr. Clark are vested.

(8) Represents Lynda Keeton-Cardno’s 477,500 shares of common stock and no common stock options. Does not include 10,000 unvested shares.